Deutsche Telekom AG has about $18 billion at its disposal after its $11-billion secondary offering last week, and speculation is running high about what acquisitions it will make in Europe and the United States.
“I will not name names today,” Ron Sommer, chief executive of Deutsche Telekom, said after the issue sold. The German telecom company has pledged to become a global player present in all large markets, acquiring mobile-phone companies, Internet service providers and information systems groups.
“The first logical thing is to expand on the European front,” said Rita Solanke, analyst with the Yankee Group in the United Kingdom. “The next logical step would be to try and get a transatlantic linkup, not necessarily a merger, but a linkup. If you look at what others are doing, that is the paradigm to maintain leadership … Now that it has the money, the drive is to get an international player and push itself in terms of technology.”
Deutsche Telekom is one of five contenders shortlisted to purchase U.K. mobile phone operator One-2-One, which was put up for sale by owners Cable & Wireless and MediaOne in March following AT&T Corp.’s $62.5 billion acquisition of MediaOne. Other shortlisted buyers include France Telecom, Germany’s Mannesmann, Telecom Italia Mobile and Vivendi, a French utilities conglomerate.
Joachim Kroeske, chief financial officer of Deutsche Telekom, said the company would announce a deal by the fall that is similar to the majority control it acquired earlier this year in Max.mobil, Austria’s second-largest wireless telecommunications company. The company has said it is particularly interested in the major European markets of the United Kingdom, France, Italy and Spain.
Deutsche Telecom’s global play could include a stronger relationship with U.S. long-distance company Sprint Corp., whose subsidiary nationwide operator Sprint PCS led the industry in subscriber additions the last two quarters. Sprint has been negotiating hookups with its minority owners Deutsche Telekom and France Telecom for some time, say sources close to the companies.
The timing may be right for Deutsche Telekom, which today faces the possible dismantling of Global One, a global telecom venture that includes Deutsche Telekom, France Telecom and Sprint, and a shaky relationship with France Telecom.
Newspaper reports in recent months have indicated the Global One partnership is near collapse, and Global One President and Chief Executive Officer Gary Forsee last week resigned, citing personal reasons.
The partners have thrown almost $1.5 billion into the venture since it was created, but revenue growth in the past year was negligible, and the venture continues to lose money, said a recent Yankee Group report on global telecom players. Analysts say the three have not been totally committed to the project, preferring to further their own companies’ strategies.
Sprint said the partners are negotiating changes.
“All three of the parent companies are discussing Global One and the structure of it and hope to have some type of resolutions within the next few months,” said Bill White, Sprint spokesman.
Analysts believe France Telecom could sell its stake in Global One to Deustche Telecom, but it would be an expensive purchase for the company and could expose Deutsche Telekom, which is suffering in its own market, to too many weaknesses.
“Even if DT buys more into it, Global One’s major weakness is exploiting IP and the Internet,” said Solanke. “For BT and AT&T, Internet backbone networks are a priority. It’s not a priority for Global One.”
But Solanke notes that Global One could prosper if it found a stable home and committed owners.
Deutsche Telekom’s move to save Telecom Italia from a hostile takeover from Olivetti SpA with a “white knight” bid damaged relations with Deutsche Telekom’s strategic partner France Telecom, which is suing the company, claiming Deutsche Telekom breached strategic partnership agreements by not revealing its plans.
The two arranged a cross-shareholding agreement last year and are owners in the new Italian cellular operator Wind SpA. Both are said to be pursuing their own international strategies now.
N.Y. Bureau Chief Elizabeth V. Mooney contributed to this article.
